A Rebound in US Manufacturing?

One interesting story buried under all the other economic news is the
fact that the US manufacturing sector is starting to make a comeback, which
could be very good news, writes John Mauldin of Thoughts from the
Frontline.

Just as agricultural output per worker has increased dramatically over time,
I think that in the next 40 to 50 years, we will see massive gains in
manufacturing output without an accompanying large increase in manufacturing
jobs.

Companies are beginning to bring manufacturing back to the US because
automation, robotics, and other new technology make it cheaper to manufacture
products locally than to use inexpensive labor in other countries. I am told
that Foxconn (in China) is beginning to use robotic manufacturing lines. When
Foxconn is turning to robots rather than cheap labor, you know there is a
revolution in the offing.

Yet even the manufacturing jobs that are left will not demand a "college
degree." They will require serious skills and technical know-how, but that is
different from the typical college degree. That is not to say college education
will not be useful, but it is increasingly going to have to be an education that
has a focus and goal of a marketable skill.

What is going to be needed is the creation of brand-new industries, as well
as the unleashing of the entrepreneurial skills of the younger generation. Small
business is the engine of growth for jobs.

It seems that all politicians can do is talk about the need to create jobs,
yet the reality is that government doesn't create jobs. It can create the
conditions in which jobs are created, but it is up to the individual businessman
(or, increasingly, businesswoman) to make a decision to hire additional
workers.

My friend Bill Dunkelberg is the chief economist for the National Federation
of Independent Businesses. He's been doing regular surveys since at least 1974.
His latest monthly survey shows that businesses are not terribly optimistic in
terms of their plans to increase employment, which should be no surprise. The
number one problem? Uncertainty.

Click
to Enlarge

Click to Enlarge

Let's hope that our political leaders can give us a little more certainty and
that it will not be the certainty of a recession. David Krone (Senate Majority
Leader Reid's chief of staff) felt, in our interview for the Summit last week,
that it was only 50-50 that a deal would be done to avert the fiscal cliff.

He was rather adamant that they would rather go over the cliff than kick the
can down the road on the deficit. Not that it couldn't be fixed later...

I should note that both congressional chiefs of staff acknowledged they have
been working for weeks prior to the election to come up with solutions to the
cliff. These are the guys (along with their counterparts) responsible for much
of the detail that will come out of the negotiations. They don't get interviewed
often, and that is a shame.

It makes you feel better about the country to know there are people who care
enough about our future to work with each other responsibly, even if they don't
agree on the path we must take.